ZMDC seeks $500 000 bailout

HARARE - State-owned mining investment vehicle, Zimbabwe Mining Development Corporation (ZMDC) is looking for a half-a-million dollar bailout package from local banks to capitalise operations, the group said.

In a response to queries raised by the auditor and comptroller general, Mildred Chiri, in her 2014 report on parastatals, the State-owned corporation said efforts were being made to secure $500 000 for dormant mines owned by the ZMDC.

“The Corporation, through the new Mining Development Board, is looking for investors, to partner with in forming joint ventures, to exploit resources at SMM Holdings, Mhangura Copper Mines, Kamativi Mine, Lomagundi Smelting Mine, Sandawana Mines and Golden Kopje.

“Mining Development is going to retreat dumps and the required capital outlay is estimated at $500 000 which will be sourced from the local banks. It is anticipated that the Mining Development project will be profitable,” the group said.

Chiri had observed the corporation had funded non-producing subsidiaries in 2013, despite the fact that there were no clear turnaround strategies on how the companies were going to start production and how the invested funds were going to be recovered.

SMM Holdings had received $5,2 million from the ZMDC with a cumulative funding $16,7 million, Mining Development (Private) Limited had also received $1,4 million form the corporation with a cumulative funding of $6,2 million while Sandawana Mines (Private) Limited had received a cumulative amount of $7,1 million.

According to Chiri, ZMDC’s allocation of scarce financial resources to recurrent expenditure came at the expense of capitalisation of other projects with high returns.

“The Corporation should consider allocating resources to subsidiaries based on clear fundable business plans,” Chiri recommended.

This comes as a management and resource depletion fee income amounting to $3,2 million from its investment, Anjin Investments (Private) Limited (Anjin) is included in ZMDC revenue with the State-owned mining vehicle entitled to three percent of Anjin’s gross revenue earned from sale of diamonds as resource depletion fees.

However, Chiri was unable to obtain sufficient appropriate audit evidence on the completeness and accuracy of the three percent share of revenue as no financial information was availed from Anjin.

The auditor also revealed in the same report that ZMDC’s investment in Jinan Mining (Private) Limited (Jinan) — a joint venture accounted for by the equity method — is carried at $105,1 million in the statement of financial position as at December 31, 2013.

Jinan’s net loss amounting to $28,4 million is also included in the ZMDC’s income for the year but the mine did not carry out a full stock count of physical inventories at year end. Meanwhile, Mbada Diamonds, a joint venture, posted a $49,6 million loss and its current liabilities exceeded current assets by $89,9 million according to Chiri.

“Management did not present a clear turnaround plan on how the company would be able to raise funding to pay its liabilities as they fall due and bring the joint venture to profitability.

“These events indicate a material uncertainty that may cast significant doubt on the joint venture’s ability to continue as a going concern and therefore the joint venture may be unable to realise its assets and discharge its liabilities in the normal course of business,” said Chiri.

 

Comments (1)

Mildred Chiri and her team are great, doing a very good job but nobody in government cares because they all corrupt, blaming other people at home and abroad.

Morgen Gore - 23 August 2015

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